Chinese traders wary of Indonesian thermal coal imports amid thin profit International,  Thermal Coal 2022-05-11 17:39:27

Chinese traders are cautious of buying thermal coal from Indonesia, as it would be almost profitless compared with domestic utilities' tender prices.

Sandwiched by high selling prices from Indonesian miners and relatively low acceptance of Chinese utilities, traders were not active in purchasing Indonesian coal for the time being. If failing to lock buying prices at a fixed exchange rate, they can hardly make money, traders said.

Currently, Indonesian miners offered 3,800 Kcal/kg NAR thermal coal for Panamax cargoes at $98-100/t FOB. "If utilities don't award cargoes of this grade at prices above 850 yuan/t (on a CFR basis with VAT), traders cannot make money," said a Beijing-based trader.

A state-owned utility on May 10 invited bids for 598,000 tonnes of imported coal to be delivered in late May to early June with calorific values from 3,000 Kcal/kg to 5,000 Kcal/kg NAR.

Tender results are yet to be known at of the time of writing, but some bids from traders were heard at 820-872.5 yuan/t for 3,800 Kcal/kg NAR. Considering the exchange rate and $12-13/t Panamax shipping rate from South Kalimantan to South China, bidding prices would be $96-103/t FOB.

"The bidding prices have left a potential profit margin for traders, but the utility may choose to reject," said a Guangdong-based trader.

The exchange ratio is a variable for traders' profitability, given the recent sharp depreciation of Chinese yuan against the dollar, the trader added.

Coal consumption at power plants in South China declined this week because of the rainy weather. Guangdong's meteorological center on May 11 reported nearly half of the cities in the province were hit by rainstorms, with eight cities issuing the highest-level red alarms. It is expected the rainfall would keep strength in the next few days.

The monsoon season has started earlier this year in the south, which may slow utilities' restocking progress, the trader said.

Chinese traders are also eying a potential growth in Russian coal imports in the future, but the tonnage is presently low because of tightened supply and uncompetitive prices, although the settlement methods have become less a problem.

Russian 4,700 Kcal/kg NAR thermal coal was roughly offered at 1,050 yuan/t CFR South China with VAT, and 5,500 Kcal/kg NAR grade was at 1,260 yuan/t CFR, almost on par with the domestic cargoes for this grade.

Currently, the majority of Russian shipments are still flowing into South Korea and Japan, and some small buyers in Europe before the EU embargo order taking effect mid-August, traders noted, adding they are outbidding Chinese buyers.

On May 11, the CCI 4700 Import index, gauging the trading level of Indonesian 4,700 Kcal/kg NAR coal, reached $148/t CFR China, flat from a day ago. CCI 3800 Import index was $106/t CFR, and the FOB index $91/t, both unchanged from a day before.

(Writing by Alex Guo  Editing by Tammy Yang)
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